Use of Leontief input-output techniques in allocating indirect costs for instructional systems

Abstract

The accurate determination of costs for various instructional programs forms one essential aspect of a PPBS for a school district. How indirect costs are allocated to the various instructional programs, therefore, becomes an important problem. Traditionally, these indirect costs are usually added to the direct costs by means of a constant ratio of indirect to total cost. The purpose of this study is to demonstrate how a modified Leontief input-output model can be used to accurately determine and allocate indirect costs among the various instructional programs. A simple model composed of two indirect cost sectors, and two direct cost sectors is used to illustrate the technique. A comparison of traditional vs. the input-output methods of allocating indirect costs is included. The results obtained in this simple preliminary study strongly suggest future use of this technique as an alternative to the traditional ratio method for allocating indirect costs. Future studies of a large school district are also suggested.